Siebel Systems Hit With Class-Action Suit
Shareholders of CRM vendor Siebel Systems are suing the company, alleging that the company exaggerated customer satisfaction levels in order to inflate stock prices.
On Thursday, the law firm of Schiffrin & Barroway filed a class-action lawsuit in the U.S. District Court for the Northern District of California on behalf of Siebel shareholders.
According to the complaint, certain Siebel executives and directors allegedly violated the Securities Exchange Act of 1934 (the “Exchange Act”) by issuing “false and misleading statements … that artificially inflated the price of Siebel Systems shares” between October 1, 2001 and July 17, 2002.
In particular, the suit alleges, Siebel “misrepresented its business and future prospects by overstating customer acceptance of its new product offerings — including Siebel 7 CRM — and failed to disclose that ‘independent' customer satisfaction surveys which persuaded investors that a vast majority of the Company's customers would purchase products from the Company in the future were in fact carried out by an affiliated company and could not be relied upon.”
According to the lawsuit, “On July 17, 2002, Siebel announced its second quarter June 30, 2002 earnings reporting a precipitous drop in revenues of more than 15% and a 33% shortfall in earnings compared to consensus analyst forecasts. The Company also confirmed the continuing slide in demand for Siebel Systems' products by slashing revenue forecasts for the remainder of 2002 by an additional 25% — or $600,000,000 below guidance provided by defendants just six months prior. In unusually heavy volume of 65 million shares traded, Siebel Systems share prices dropped $2.13 on July 18 to close at $9.61.”
Siebel shares were trading early Friday afternoon at $11.61, down 17% since the beginning of the year. Volume this week has been heavier than usual.
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